Wage Formation between Newly Hired Workers and Employers: Survey Evidence

25 Pages Posted: 15 Sep 2008 Last revised: 28 Aug 2010

See all articles by Robert E. Hall

Robert E. Hall

Hoover Institution and Department of Economics, Stanford University; National Bureau of Economic Research (NBER)

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2008

Abstract

Some workers bargain with prospective employers before accepting a job. Others could bargain, but find it undesirable, because their right to bargain has induced a sufficiently favorable offer, which they accept. Yet others perceive that they cannot bargain over pay; they regard the posted wage as a take-it-or-leave-it opportunity. Theories of wage formation point to substantial differences in labor-market equilibrium between bargained and posted wages. The fraction of workers hired away from existing jobs is another key determinant of equilibrium, because a worker with an existing job has a better outside option in bargaining than does an unemployed worker. Our survey measures the incidences of wage posting, bargaining, and on-the-job search. We find that about a third of workers had precise information about pay when they first met with their employers, a sign of wage posting. We find that another third bargained over pay before accepting their current jobs. And about 40 percent of workers could have remained on their earlier jobs at the time they accepted their current jobs.

Suggested Citation

Hall, Robert E. and Krueger, Alan B., Wage Formation between Newly Hired Workers and Employers: Survey Evidence (September 2008). NBER Working Paper No. w14329. Available at SSRN: https://ssrn.com/abstract=1267560

Robert E. Hall (Contact Author)

Hoover Institution and Department of Economics, Stanford University ( email )

Stanford, CA 94305-6010
United States
650-723-2215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
650-723-2215 (Phone)

Alan B. Krueger

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4046 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
19
Abstract Views
474
PlumX Metrics